Better Operations with Gordon James Millar, SLO Native

Gordon James Millar, of San Luis Obispo, shares his perspective on bettering your engineering and operations organizations. This perspective does not speak on behalf of Gordon's employer.

After spending over a decade optimizing manufacturing operations and managing complex technical systems, I’ve discovered that many of the same principles that drive efficiency in industrial settings apply remarkably well to real estate investment and property management.

The intersection of systematic thinking, process optimization, and risk management creates a framework that can transform how you approach real estate—whether you’re evaluating your first investment property or managing a growing portfolio.

What if you approached real estate investing with the same rigor you’d apply to designing a manufacturing system?

The Systems Approach: Treating Real Estate as an Operation

Most people stumble into real estate investing with minimal planning, much like trying to run a factory without understanding lean principles or quality control systems. But real estate, at its core, is an operational business that responds well to engineering discipline.

Think of each property as a production unit with inputs (capital, maintenance, management time), processes (tenant acquisition, rent collection, maintenance workflows), and outputs (rental income, appreciation, tax benefits). Like any system, optimization requires understanding the relationships between these components and continuously improving performance.

The Investor’s Operations Manual

1. Market Analysis as System Design

Before investing in any manufacturing process, you’d conduct feasibility studies, analyze supply chains, and understand market dynamics. Real estate requires the same analytical approach:

  • Demographics and Employment Trends: Just as you’d evaluate the supply chain for raw materials, analyze population growth, job market stability, and economic diversification in your target markets
  • Comparative Market Analysis: Like benchmarking against industry standards, understand pricing trends, rental rates, and absorption rates across different property types
  • Infrastructure and Development: Assess transportation networks, utilities, and planned development the same way you’d evaluate facility location factors

2. Due Diligence as Quality Control

In manufacturing, quality control prevents defects from reaching customers. In real estate, thorough due diligence prevents costly surprises after purchase:

  • Property Condition Assessment: Conduct inspections with the same attention to detail you’d use for incoming material inspection—structural, mechanical, electrical, and environmental systems
  • Financial Analysis: Review rent rolls, operating expenses, and capital expenditure history like you’d analyze production costs and efficiency metrics
  • Legal and Regulatory Compliance: Understand zoning, building codes, and tenant laws as thoroughly as you’d know safety regulations and compliance requirements

3. Investment Criteria as Specification Standards

Manufacturing requires clear specifications for acceptable products. Real estate investing needs equally clear investment criteria:

  • Return Thresholds: Establish minimum acceptable returns for different property types and risk levels, just as you’d set performance standards for equipment
  • Location Parameters: Define geographic boundaries, neighborhood characteristics, and proximity requirements like you’d specify supplier qualification criteria
  • Property Specifications: Set standards for property age, condition, size, and configuration that align with your investment strategy

Property Management: The Operations Playbook

Property management is where engineering principles really shine. It’s essentially running a service operation with multiple stakeholders, complex logistics, and numerous moving parts that require coordination.

Tenant Relations as Customer Service

Customer Lifecycle Management: Just as manufacturing companies focus on customer retention, successful property management prioritizes tenant satisfaction and retention:

  • Onboarding Process: Create standardized move-in procedures that ensure tenants understand expectations and feel welcomed, similar to customer onboarding in service businesses
  • Communication Systems: Establish clear channels for maintenance requests, questions, and concerns—think of it as your customer service infrastructure
  • Retention Strategies: Proactively address tenant needs, maintain properties well, and create positive relationships that reduce turnover costs

Maintenance as Preventive Operations

Preventive Maintenance Programs: Apply industrial maintenance concepts to residential and commercial properties:

  • Scheduled Inspections: Regular property walks, HVAC servicing, and system checks prevent major failures and extend asset life
  • Vendor Management: Build relationships with reliable contractors and suppliers, much like developing preferred supplier networks in manufacturing
  • Inventory Management: Maintain appropriate spare parts and supplies for common repairs, applying just-in-time principles to avoid excess inventory while ensuring availability

Work Order Systems: Implement systematic approaches to maintenance requests:

  • Prioritization protocols (emergency, urgent, routine)
  • Response time standards
  • Quality control procedures for completed work
  • Cost tracking and analysis for continuous improvement

Financial Operations and Performance Metrics

Cash Flow Management: Treat rental properties like profit centers with rigorous financial tracking:

  • Monthly Financial Reporting: Track income, expenses, and net operating income like you’d monitor production metrics
  • Variance Analysis: Compare actual performance to budgets and investigate significant deviations
  • Capital Expenditure Planning: Schedule major improvements and replacements based on asset condition and return on investment calculations

Key Performance Indicators: Develop metrics that drive decision-making:

  • Occupancy rates and tenant turnover
  • Average days to lease vacant units
  • Maintenance cost per unit and per square foot
  • Rent growth compared to market averages
  • Capital expenditure as percentage of gross income

The Intersection: Where Investing Meets Management

The most successful real estate operators understand that investment decisions and management execution are inseparable. Poor management destroys investment returns, while properties that can’t be efficiently managed shouldn’t be acquired in the first place.

Property Selection Through the Management Lens

Operational Complexity Assessment: Before purchasing any property, evaluate management requirements:

  • Tenant Profile: Properties requiring more hands-on management (student housing, short-term rentals) need different operational capabilities than stable long-term rentals
  • Maintenance Intensity: Older properties or those with specialized systems require different skill sets and vendor networks
  • Geographic Concentration: Managing scattered properties is like trying to oversee multiple remote manufacturing facilities—efficiency decreases with distance

Scaling Considerations

Systems and Processes: As your portfolio grows, operational efficiency becomes critical:

  • Standardization: Develop standard operating procedures for tenant screening, lease terms, maintenance protocols, and financial reporting
  • Technology Integration: Implement property management software, online rent collection, and digital communication systems to reduce administrative overhead
  • Staff Development: Build or outsource management capabilities based on portfolio size and complexity

Portfolio Optimization: Apply portfolio theory concepts from manufacturing operations:

  • Diversification: Balance property types, locations, and tenant profiles to reduce overall risk
  • Economies of Scale: Achieve cost efficiencies through bulk purchasing, shared services, and operational consolidation
  • Performance Analysis: Regularly evaluate each property’s contribution to overall portfolio performance and consider disposition of underperforming assets

Practical Implementation Strategies

Starting Small: The Proof of Concept Approach

Single Property Focus: Like implementing lean manufacturing in one production cell before expanding, start with one property to develop and refine your systems:

  • Document Everything: Create procedures for every aspect of property management, from tenant screening to maintenance protocols
  • Measure Performance: Track all relevant metrics to understand what drives success and where improvements are needed
  • Refine Processes: Continuously improve based on experience and results before scaling to additional properties

Building Your Operational Infrastructure

Technology Stack: Invest in systems that support efficient operations:

  • Property management software for financial tracking and tenant communication
  • Online platforms for rent collection and maintenance requests
  • Accounting systems that integrate with property management tools
  • Digital document storage and lease management systems

Vendor Network Development: Build relationships with reliable service providers:

  • General contractors and specialized trades (plumbing, electrical, HVAC)
  • Property inspectors and appraisers
  • Insurance agents and legal counsel
  • Cleaning services and landscaping contractors

Risk Management and Contingency Planning

Operational Risk Assessment: Identify and plan for potential disruptions:

  • Vacancy Risk: Maintain reserves and marketing strategies to minimize vacancy periods
  • Maintenance Emergencies: Establish emergency contractor relationships and maintain adequate cash reserves
  • Economic Downturns: Understand how market conditions affect your properties and tenant base
  • Regulatory Changes: Stay informed about local rent control, tenant protection, and building code updates

Insurance and Legal Protection: Implement comprehensive risk management:

  • Adequate property and liability insurance coverage
  • Proper business structure (LLC, corporation) for asset protection
  • Legal compliance with fair housing laws and local regulations
  • Professional relationships with real estate attorneys and insurance agents

Advanced Strategies: Optimization and Growth

Value-Add Operations

Property Improvement Projects: Apply project management principles to property upgrades:

  • ROI Analysis: Evaluate improvements based on cost, timeline, and impact on rental income or property value
  • Project Planning: Use structured approaches to renovation projects, including contractor selection, timeline management, and quality control
  • Phased Implementation: Minimize vacancy and disruption through strategic staging of improvements

Operational Efficiency Improvements: Continuously optimize management processes:

  • Automate routine tasks like rent collection and lease renewals
  • Implement predictive maintenance based on equipment age and performance
  • Optimize vendor costs through competitive bidding and long-term relationships
  • Streamline tenant communication and service delivery

Portfolio Expansion Strategies

Market Penetration vs. Diversification: Make strategic decisions about growth:

  • Geographic Concentration: Benefits include operational efficiency, market knowledge, and vendor relationships
  • Property Type Specialization: Develop expertise in specific asset classes (single-family, small multifamily, commercial)
  • Balanced Growth: Consider market cycles and portfolio risk when planning expansion

Acquisition Criteria Refinement: Evolve investment standards based on operational experience:

  • Adjust return requirements based on actual management costs and time investment
  • Develop property scoring systems that weight operational considerations alongside financial returns
  • Create standardized evaluation processes that can be applied consistently across opportunities

Common Challenges and Solutions

The Time Management Challenge

Balancing Hands-On vs. Systems Approach: Many investors underestimate the time required for property management:

  • Solution: Start with clear time budgets for different activities and track actual time investment
  • Automation: Implement systems that reduce routine administrative tasks
  • Outsourcing: Develop criteria for when to outsource vs. self-manage based on portfolio size and complexity

The Scaling Challenge

Maintaining Quality as Volume Increases: Growth can compromise the attention to detail that drives success:

  • Standardization: Develop repeatable processes that maintain quality regardless of portfolio size
  • Performance Monitoring: Implement metrics and reporting systems that provide early warning of declining performance
  • Team Development: Build internal capabilities or outsource to professional management companies as appropriate

The Market Cycle Challenge

Adapting to Changing Conditions: Real estate markets are cyclical, requiring operational flexibility:

  • Scenario Planning: Develop strategies for different market conditions (rising rates, economic recession, oversupply)
  • Cost Structure Management: Maintain flexibility in operating expenses to adapt to changing revenue conditions
  • Capital Allocation: Adjust acquisition and improvement strategies based on market cycles

The Long-Term Perspective: Building Wealth Through Operations

Real estate investing success isn’t just about finding good deals—it’s about executing consistently excellent operations over time. The properties that generate the best long-term returns are typically those that are well-managed, well-maintained, and continuously optimized.

Operational Excellence Creates Investment Returns: Properties with superior management command higher rents, experience less turnover, and require fewer major capital expenditures. These operational advantages compound over time, creating significant differences in investment performance.

Systems Thinking Enables Scaling: Investors who treat real estate as a business with systems, processes, and metrics are better positioned to scale successfully. They can identify and replicate what works while avoiding the chaos that derails many real estate ventures.

Continuous Improvement Drives Value: Like any operation, real estate investing benefits from continuous improvement. Regular analysis of performance, refinement of processes, and implementation of best practices creates sustainable competitive advantages.

The intersection of investment acumen and operational excellence is where real estate wealth is truly built. Whether you’re managing a single rental property or a diverse portfolio, approaching real estate with the discipline and systematic thinking of operations management creates both better returns and more sustainable business practices.

Consider these questions: What operational principles from your professional experience could be applied to real estate investing? How might systematic thinking change your approach to property evaluation and management?